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WASHINGTON, DC – Congresswoman Carolyn B. Maloney (D-NY) sent a letter Thursday formally requesting that the Joint Economic Committee hold a hearing anti-competitive practices in the prescription drug market. The Congresswoman’s request is in reaction to a lawsuit led by 45 state Attorneys General and the Department of Justice against 18 prescription drug manufacturers alleging collusion to artificially inflate drug prices and increase profits.

The Congresswoman requested this hearing to better understand the extent of these anti-competitive practices, their economic impacts on Americans, and anti-competitive market behaviors more generally. Maloney pointed out the outrageous costs of prescription drugs that Americans are already paying and asserts that artificial inflation of the prescription drug market violates both consumer rights and the principles of free-market capitalism.

In her letter the Congresswoman noted that “the United States pays more than $1,000 per person on prescription drugs, which is the highest per-capita cost in the world. In 2016, Americans spent $341 billion in prescription drugs overall and more than $75 billion on generic prescription drugs alone. Generic drugs make up almost 90 percent of the total number of prescriptions dispensed on an annual basis.”

I am writing to request a hearing of the U.S. Congress Joint Economic Committee to investigate anti-competitive practices in the prescription drug market. There is evidence that anti-competitive behavior substantially drives up prices and that it may cost Americans billions of dollars a year.

A recent lawsuit by the Attorneys General of 45 states and the U.S. Department of Justice alleges price-fixing by 18 generic drug manufacturers[i]. It asserts that those companies systematically colluded to drive up prices and profits by forming agreements to divvy up markets and set prices. The plaintiffs name 15 generic drugs, including those for high blood pressure, diabetes, liver disease, epilepsy, asthma, glaucoma, fungal infection and other diseases. According to the complaint, “these agreements had the effect of artificially maintaining high prices for a large number of generic drugs and creating an atmosphere of competition when in fact no existed.”[ii]

In theory, generic drugs should increase competition and reduce prices. However, an investigation by House Oversight and Government Reform Committee Ranking Member Elijah Cummings and Senator Bernie Sanders found that between July 2014 and December 2014, the prices for certain generic drugs rose dramatically, in some cases by more than 1,000 percent.[iii] The details of the recent lawsuit suggest that collusive behavior in the generic drug industry may be taking place on a massive scale.

According to the Organisation for Economic Cooperation and Development (OECD), the United States pays more than $1,000 per person on prescription drugs, which is the highest per-capita cost in the world.[iv] In 2016, Americans spent $341 billion in prescription drugs overall and more than $75 billion on generic prescription drugs alone.[v] Generic drugs make up almost 90 percent of the total number of prescriptions dispensed on an annual basis.[vi]

There is evidence that there also are anti-competitive aspects to the market for brand name prescription drugs. One tactic used by manufacturers of brand name drugs is to pay a potential generic competitor to delay introduction of a generic equivalent – “pay for delay” – effectively extending the length of the patent and maintaining high prices.[vii] Researchers have found that the prices of competing brand drugs produced by different companies often also rise in lockstep. Ranking Member Cummings, Congressman Peter Welch, and Senator Sanders have raised concerns about this phenomenon in the multiple sclerosis and diabetes drug markets.[viii]

The high cost of prescription drugs should be a high-priority, nonpartisan issue. A March 2018 poll by the Kaiser Family Foundation found that 80 percent of Americans think that prescription drug prices are “unreasonable.”[ix] The same survey also found that 83 percent say that Republicans “are not doing enough” on the issue and that 82 percent say the same about Democrats.

The U.S. Congress Joint Economic Committee can play a role in helping to shed light on the economic impact of anti-competitive behavior in the market for brand name and generic prescription drugs. Moreover, it can take advantage of a broader opportunity to study other anti-competitive aspects of our economy, which stifle innovation and increase costs on consumers. When “free markets” aren’t truly free, Americans pay the price.